Super is not a honey pot: UBS

Ben Heap says the super system, with its bipartisan political support, is the envy of the world.
Photo: Michele Mossop

by
Vesna Poljak

The head of UBS Global Asset ­Management in Australia believes political attempts to weigh into the superannuation debate could discourage retirement savers from making voluntary contributions and impair the growth potential of existing super balances.

The minority Labor government has proposed increasing taxes on super but retail and self-managed super funds have demanded it make no such changes when it delivers its May budget.

UBS’s Ben Heap, who believes that the Australian system is the envy of the world, echoed the warnings of the industry’s leaders, and added that some of the benefits of compounding could be lost to taxation changes and potentially reduce the funds available to members upon retirement.

“I would suggest that this is the first election campaign where superannuation has been a genuine election issue and my argument would be that it should be a bipartisan issue – easier said than done – and the bipartisan position should be that we will not treat superannuation as a honey pot. We will not try and solve a near-term deficit problem by taxing super a little bit more or changing the rules."

He said this had two consequences and both risked putting a greater reliance on the nation’s pension safety net over the long term.

“The short-term tax gain is money that would have otherwise compounded over the next ‘X’ years and helped a percentage of the population not use your pension system and number two, by constantly tinkering with the system people won’t trust the system. People won’t put money into super and then the state is going to have to deal with it."

Mr Heap characterised the current system as “fabulous" and commended the fact that it had largely been supported in a bipartisan way since inception more than 20 years ago. However, it “is at real risk of suddenly becoming a political honey pot and that would be a mistake," he said.

Financial Services Council chief executive
John Brogden
, a former NSW Liberal leader, has urged the government to make a commitment to no further changes by March 14 when Parliament next sits, according to comments he made last week. Mr Brogden also said it was too early to say if the industry would mount a television campaign if Labor refused to rule out changes to taxes on super the way the mining industry did when faced with the mining tax in 2010.

Related Quotes

Company Profile

Mr Heap reckons there is no single figure that most Australians need to accumulate in savings to retire and enjoy the standard of living they are accustomed to. “There’s definitely not one size fits all. It depends entirely on the standard of living you want to retire on," he said. “I can assure you that the $800,000 number that got bandied around in the last couple of weeks is not going to be enough for the average Australian and the reason for that is people are not dying at a young age."

He said it is important to recognise the government provides a “frankly very generous" pension if a retiree’s super dries up sooner than expected but “equally it’s not in the state’s best interest to have people use up their retirement savings and drop into the pension".

Under current rules voluntary contributions are capped to a specific level through tax penalties depending on age. Mr Heap does not see the caps ever being removed but believes it could be sensible to lift the caps and give people more flexibility to boost their contributions.

“It’s really important that we don’t for the short term either political benefit or tax benefit of fairness don’t disadvantage the state in the long term," he said.

Mr Heap previously ran UBS’ infrastructure business in the United States for four years before returning to Australia.

He observed that at the same time as the policy debate around super is happening, the Australian wealth management industry is going through its own period of change as consumer attitudes shift and structural change takes force. “And right now there’s tremendous uncertainty and probably has been for a while," Mr Heap said. “There’s lots of people who feel like we’ll never have good times again. I reject that entirely. I think it’s a little bit darkest just before the dawn and my suspicion is that we will come through over the next few years and have a real renaissance of the growth of the wealth industry in Australia."